The Bank of England says the 2 trillion pounds worth of assets under management by British could be hit from multiple directions, notably physical risks and liabilities and repricing of assets like fossil fuels.
At issue is “financial stability.” Repricing traditional fossil fuel assets could happen suddenly, causing those wonderful crashes we all love so much. The Bank suggests dodging the bullets and factoring in moves in asset risks.
There’s absolutely no doubt at all that a move away from a fossil fuel economy would rewrite the global asset base, drastically. Fossil fuels aren’t the only things likely to wind up in the blender. Cars, coal, you name it; the risk of sudden drops in value of assets can’t be overstated. It can happen very quickly; and markets usually don’t wait to get saddled with dead assets. They run before the asteroid hits. Check out the NASDAQ charts for recent price moves in crude oil, and mining industry index for coal, for example.
Given the imbecility and irrationality of the carbon industry and its refusal to simply adapt its products to the constant tides of new tech which use high value carbon, like graphene, counter balancing the move away from fuels, the other issue is equally obvious — how and when will the industry take the hint and reposition to protect itself? Forget the pointless debate about global warming; the debate is now about whether these companies can see the train coming.
If they wait to get hit by it, or they become part of the train wreck. Ironically, even the possibility of a crash, which could be caused by spooked investors or actual economic shifts, could do as much to trash the world economy as An Inconvenient Truth’s sea level rise. It’s simply a different way of destroying property and assets. There are no precedents, no road maps, and no policy easy options.
This is what happens when you try simplistic arguments about complex situations; endless babble until someone says “It could cost trillions”. Then, and only then, do our global geniuses pay attention. The Bank of England, very much to its credit, has found and named the other gorilla in the living room. It remains to be seen what will be done about it.
